IntMgt Ch5 posting - Chapter 5 International Trade Theory...

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Click to edit Master subtitle style Chapter 5 International Trade Theory 11
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Trade Theory Free trade refers to a situation where The government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country 22
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The Benefits Of Trade Smith, Ricardo and Heckscher-Ohlin show Why it is beneficial for a country to engage in international trade even for products it is able to produce for itself International trade allows a country To specialize in the manufacture and export of products that it can produce efficiently Import products that can be produced more efficiently in other countries 33
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The Patterns Of International Trade Some patterns of trade are fairly easy to explain It is obvious why Saudi Arabia exports oil, Ghana exports cocoa, and Brazil exports coffee Some are less easy to explain Why does Switzerland export chemicals, pharmaceuticals, watches, and jewelry? And Japan exports automobiles, consumer electronics, and machine tools? 44
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Mercantilism – Trade Theory Mercantilism suggests that it is in a country’s best interest to maintain a trade surplus - exporting more than it imports Mercantilism advocates government intervention to achieve a surplus in the balance of trade It views trade as a zero-sum game - one in which a gain by one country results in a loss by another 55
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Adam Smith Theory – Absolute Advantage A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it
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IntMgt Ch5 posting - Chapter 5 International Trade Theory...

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